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HIGHLIGHTS
  1. Majority of AGLC’s recent retail cannabis licences granted to independent stores
  2. Store owners are concerned more retailers will exacerbate supply shortage
  3. Family-run pot stores look forward to revenue after six-month wait

Alberta’s increase in cannabis store licences means that many independent operators will open their doors after months of waiting, but the jump in venue numbers raises concerns that the young industry’s supply crunch could further hurt individual store sales and even lead to partial closures.

“What concerns me is not having enough inventory to stay open. March was our first month when we didn’t have to close any days, however, by our last day [of every week] we’re down to only two or three items on our shelves,” said Chris Felgate, co-owner of Small Town Buds in Devon, Alta.

“It wasn’t until March that we actually saw inventories increase. The last thing we want is to go back to closing our doors a few days a week.”

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Cannabis stores receive weekly product deliveries.

Alberta Gaming, Liquor and Cannabis (AGLC) just issued 26 new retail licences due to a “modest increase in cannabis inventory available to retailers,” bringing the province’s tally of legal pot shops to 101, by far the most in any province. This came after AGLC placed a moratorium on new licences in November, five weeks after recreational cannabis was legalized, because of a country-wide product shortage. In January, 10 new licences were issued.

Roughly 15 of the 26 new licences belong to independent owners, who have been the hardest hit financially by the moratorium that unexpectedly prevented them from opening after they spent thousands of dollars to install mandated security systems, took on long-term leases and renovated stores. Established chains typically have deeper financial pockets whereas several independent owners said they had to eat into their personal savings to keep their yet-to-open businesses afloat.

While Mr. Felgate is glad other independent store owners have received licences, it is unclear how much wholesale supplies have increased, so he is concerned it will cause per-store product availability to drop. AGLC is Alberta’s sole cannabis wholesaler and has increased the number of licensed producers that it buys from to 23, from 15 in 2018, but many of these additions are relatively small growers with some not expected to deliver their first shipment until late-2019.

An AGLC spokesperson declined to comment on per-store supply availability.

“I don’t have any faith that because there are 26 more licences, we’re all of a sudden going to see a surplus of product. February saw some of our worst supplies we’ve ever seen,” Mr. Felgate said, referring to the amount his store was able to purchase from AGLC.

While 11 of the new licences were given to chain stores – most of which are publicly traded such as Fire and Flower, Nova Cannabis and NewLeaf Cannabis – the bulk were given to small family businesses such as Micro Gold Cannabis in Okotoks, Alta.

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“We were very close to getting our licence when they first put the moratorium on licences,” said Beverly Gilbert, president of family-run Micro Gold.

Micro Gold had to terminate 13 employee contracts in November, but family members still opened their store to sell accessories while awaiting their cannabis licence, but this did not bring in enough revenue to cover basic costs.

“Because no one will lend money to cannabis stores, the money’s all come from our personal savings,” Ms. Gilbert said.

“It was quite a long, arduous, expensive process. There was just no way we could cut our losses. We’re in it for $200,000.”

Relatively low rent in small Alberta towns such as Okotoks and Leduc have helped independent businesses hold out longer than they otherwise would have been able, store owners said.

“It crossed our minds to look at potential buyers,” said Warren Aubut, co-owner of Grassroots in Leduc, which is one of the independent stores that just received a licence.

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“It was stressful, ate into our money.”

Dylan Schmalzbauer in Medicine Hat also received his licence for Hat Cannabis Inc. after securing a lease last October, and expected to open shortly after.

“When cannabis came along, we thought what a great opportunity to get in on the ground floor and get in on something new. It’s not like opening a shoe store. It’s a whole new era,” he said.

But when the licence freeze came in November: “We had so much invested, we couldn’t cut our losses. It just slowly ate into our first-order money,” Mr. Schmalzbauer said.

“There was no way we were going to give up.”

Joshua Vera, president and founder of cannabis store Elevate in Edmonton, has one outlet open seven days a week “with very limited supply,” but is still awaiting the licence for his second store.

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“It definitely puts more of a strain on us but that’s totally out of my control,” Mr. Vera said.

“There are days where customers come in and they’re leaving disappointed because the selection isn’t there. I’m losing dollars every day.”

Still, he wakes up with a smile on his face, he said, adding he is undeterred about making a career out of selling cannabis.

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